Federal Reserve Chairman Powell Signals Near-Term End to Asset Purchase Program

By Tom Burnett CFA

On August 27, 2021, Federal Reserve Chairman Jerome Powell gave an important policy speech at a virtual meeting of the annual Jackson Hole Fed gathering. In his speech, Powell made it clear that substantial progress had been made on the overall employment picture. He warned, however, that the Delta variant of the Covid virus still posed a threat to the economy and the jobs markets. He strongly suggested that the current inflation figures are transitory and not permanent. The Fed will watch inflation indicators carefully and will likely consider cutting back the $120 billion a month asset purchase program by the end of this year. No specific timetable was mentioned.

Powell made it very clear that the interest rate levels are subject to a higher bar and that no change in the range for the current fed funds rate is expected in the near term. The interest rate markets did not move materially and the ten-year yield held steady at 1.32%.

Tom Burnett CFA is Director of Research